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Delaware Small Cap Core Fund Quarterly commentary March 31, 2014 Class A (DCCAX)

Within the Fund

Delaware Small Cap Core Fund (Class A shares at net asset value) posted a positive return and outperformed its benchmark, the Russell 2000® Index, in the first quarter of 2014.

Excess returns were driven by stock selection in the energy, finance, and consumer services sectors. Detractors during the quarter were in the consumer staples, business services, and real estate investment trust (REIT) sectors. At the end of the quarter, the Fund’s top overweights were in the communications services, basic materials, and finance sectors. The Fund’s largest underweights were in the utilities, REIT, and credit cyclicals sectors.

In general, investors favored the traditionally defensive sectors of the market during the quarter as value stocks outperformed growth stocks. We pared back some of the more growth-oriented stocks in the portfolio and added more value-oriented names.

During the quarter, the Fund’s overweight allocation to InterMune, KEYW Holding, and Pioneer Energy Services contributed the most to relative performance. On the negative side, overweights in Rocket Fuel, Brightcove, and Prestige Brands Holdings detracted the most from the Fund’s performance.


Looking forward, we believe small-caps could continue to benefit from many of the conditions that contributed to 2013 growth. Inflation remains low, the Federal Reserve remains accommodative, and consumer confidence continues to expand. While housing and auto sales weakened during the first quarter, we believe it was a result of poor weather conditions and not true softness in the economy.

We remain cautiously optimistic about the market and continue to keep a close eye on economic indicators. Improving economic conditions in the United States have the potential to provide further tailwinds to small-cap equities. Given the healthy levels of cash on corporate balance sheets and favorable credit market conditions, we believe mergers-and-acquisitions activity could continue to improve.

With the correlation of returns between stocks in the Index continuing to fall, we believe we are poised for another strong year as stock selection becomes an increasingly important factor. Through the strength of our research process, and investing in companies that we view as having strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams, we believe we have the potential to outperform.


The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.


The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of quarter-end (03/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)1.39%1.39%28.12%15.84%25.56%9.06%11.26%12/29/1998
Class A (at offer)-4.42%-4.42%20.77%13.58%24.07%8.41%10.83%
Institutional Class shares1.43%1.43%28.46%16.11%25.84%9.29%11.42%12/29/1998
Russell 2000 Index1.12%1.12%24.90%13.18%24.31%8.53%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

Prior to Aug. 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. 12b-1 fees were waived for this period. Had 12b-1 fees been applied, performance would have been lower. Expense waivers were in effect for the periods shown. Performance would have been lower if waivers did not apply.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Russell 2000® Index (view)

Expense ratio
Class A (Gross)1.31%
Class A (Net)1.31%
Institutional Class shares (Gross)1.06%
Institutional Class shares (Net)1.06%
Top 10 holdings as of 03/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Air Methods Corp.1.2%
Susser Holdings Corp.1.2%
Tenneco Inc.1.1%
Jack in the Box Inc.1.1%
RigNet Inc.1.1%
Steven Madden Ltd.1.1%
G-III Apparel Group Ltd.1.1%
Align Technology Inc.1.1%
West Pharmaceutical Services Inc.1.0%
Total % Portfolio in Top 10 holdings11.1%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

All third-party marks cited are the property of their respective owners.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

Not FDIC Insured | No Bank Guarantee | May Lose Value